(Chris Powell, Gold Anti-Trust Action Committee) The gold and silver markets feel much stronger.
The central bank-instigated smashdowns that used to depress prices for weeks or even months are failing to keep prices down for more than a few days.
The gold futures market of the New York Commodities Exchange is operating very differently. Most contracts seeking delivery are now being converted through a rarely used mechanism called “exchange for physicals” whereby they are settled somewhere off the exchange, apparently in London.
Until recently the “exchange for physicals” mechanism was said to be used only in emergencies. Now it seems that everything is an emergency. The implication here is that there is little or no gold available immediately in Comex vaults.
The “exchanges for physicals” seem to be rolled over in London every two weeks to escape ordinary reporting requirements. This implies that the sellers are trying to hide something. Of course that the powers in the gold market are trying to hide things is not new, but that they are using new mechanisms of concealment suggests that they are under greater strain.
Of course central banks, if you believe their announcements, have turned into big net buyers of gold in the last couple of years and have let the European Central Bank’s longstanding regulatory framework for gold sales expire. That is, central banks are not selling much if any gold anymore, and sales and leases of central bank gold long have provided a big part of supply.
Many central banks and President Trump himself are clamoring to devalue their currencies. Many European government and private-sector bonds are carrying negative interest rates, which suggests that the world financial system has gone crazy. Negative interest rates essentially proclaim that government-issued money is hardly worth anything anymore, except for paying taxes – that money is free.
Swiss gold export data recently showed a reversal of the normal flow of gold out of London to Swiss refineries and onward to Asia. Instead gold lately has been flowing back to London as offtake there has increased greatly.
Such developments may be expected as the United States lately has been weaponizing the dollar in foreign affairs and imposing economic sanctions on any country that crosses U.S. policy. Lately there have been serious defections from the dollar system, and the defectors may have nowhere to go except to gold.
But as much as central banks and President Trump want to devalue, they may want to devalue only against each other, not against gold, since — if devaluing against gold is done gradually rather than suddenly, as in an international currency revaluation — devaluation risks prompting a flight out of currencies, bonds, and equities and into the monetary metals.
With negative interest rates, near infinite creation of government money, and greatly increased offtake of gold and silver in the physical markets, today’s circumstances might seem hugely favorable to the monetary metals. Since there is now division among central banks in regard to gold, with many central banks acquiring it instead of selling or leasing it to suppress its price, today’s circumstances may resemble those of the last months of the London Gold Pool in late 1967 and early 1968.
Back then the gold that major central banks were prepared to lose from their reserves in an effort to support their own currencies and particularly the U.S. dollar, the world reserve currency, ran out, and the United States, having lost two-thirds of its gold reserves in maintaining the pool, had to ask the British government to close the pool abruptly.
Market-rigging governments and central banks are not going to give up easily, and their power to create infinite money and disburse it secretly, great as it is, is not even their greatest power.
No, the greatest power of market-rigging governments and central banks is their ability to intimidate news organizations and market analysts out of investigating and telling the truth about what governments are doing in the markets. If the truth of those market interventions was ever reported, the markets might be very different. They might become actual markets again.